2019 Index of Economic Freedom

Regional Developments in Economic Freedom

Average levels of economic freedom vary widely among the five regions of the world. Europeans typically enjoy the highest levels of economic freedom with an average score of 68.6, far higher than the world average of 60.8. The Middle East and North Africa, Asia–Pacific, and Americas regions have economic freedom scores near the world average at 61.3, 60.6, and 59.6, respectively, while the Sub-Saharan Africa region falls significantly short at only 54.2.

The benefits of economic freedom—greater income, wealth, better health, and cleaner environments, among many others—are evident in every region, but there are substantial differences among the regions in terms of level of development and social and economic culture that affect the relative importance of the various factors that influence an economic freedom score.

The 12 indicators that make up an economic freedom score are equally weighted in determining the rankings. For individual countries looking to improve their scores, however, a focus on the indicators in which they perform most poorly provides the greatest opportunity for major increases in economic freedom. A country that lags in fiscal health, for example, might want to prioritize reductions in fiscal deficits and debt. A country that lags in the rule of law could concentrate on addressing corruption, judicial effectiveness, and the protection of property rights. Such focus can bring significant immediate gains in economic freedom and corresponding improvements in economic growth and prosperity.

While there is diversity within every region, certain patterns have emerged that point to the relative importance of various factors in holding back or promoting economic freedom in each region. The countries of the Americas, for example, lag significantly in the rule of law and regulatory efficiency. Particularly for most of the Latin American countries in the region, a culture of corruption holds back foreign investment and job growth, and the typically poor quality of the region’s regulatory environment stifles entrepreneurship. These, then, are the most important areas for reform in a typical country in the Americas.

In the Asia–Pacific region, on average, it is market openness and particularly investment freedom and financial freedom that fall far below world standards. Action by populous countries like China and India to relax restrictions on foreign investment and open their banking systems to competition from around the world would improve the livelihoods of hundreds of millions of people. High-performing Asian economies like those of Hong Kong, Singapore, New Zealand, and Australia have shown the way.

It is in the area of government size that the European countries tend to lose points in their economic freedom scores. In many countries, burdensome levels of taxation and extraordinarily high levels of government spending have led to unsustainable fiscal balances that crowd out more productive private-sector activities.

The Middle East and North Africa region falls far behind others in fiscal health, with governments using debt to finance high spending on consumer subsidies and income-redistribution schemes. Problems related to the rule of law are notable throughout the region, as is a serious lack of investment freedom in many countries.

Sub-Saharan African countries trail world averages in almost every category of economic freedom, especially in scores for fiscal health and business freedom. Ongoing deficiencies in scores for property rights, judicial effectiveness, and government integrity continue to reflect problems in governance that are both the cause and the effect of high levels of political instability and conflict throughout the region.

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